When the Price Is Less Than the Equilibrium Price

question 235

Multiple Choice

When the price is less than the equilibrium price

• A) there will be a shortage.
• B) some consumers will be willing to pay a price higher than the prevailing price.
• C) the price will be forced higher.
• D) All of the above answers are correct.

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Definitions:

Required Return

The minimum expected return by investors for investing in a particular asset, considering the risk associated with it.

Beta

It is a measure of a stock's volatility in relation to the overall market, indicating the stock's relative risk.

Risk-free Rate

The return on investment with no risk of financial loss, typically associated with government bonds.

Security Market Line

A graphical representation used in financial markets to show the relationship between risk (measured as beta) and expected return of investments.